President in tug-of-war with oil industry over pipeline order

WHILE President Trump continues to make promises, Mr. Reality keeps writing checks. The latest reality check is the oil and gas industry’s balk at Trump’s plan to dictate the origin of steel used in petroleum pipelines. The administration, backed by trade unions, wants the America First principle applied to steel. Big Oil says it’s not realistic.

This is a tug-of-war that has parallels in Trump’s promise on the border wall, Obamacare repeal and tax reform. The push-pull so far has Trump on the losing side.

In the case of steel imports, the winning side should be moderation. Pipelines are a safer alternative to rail transport for oil. The shale boom has exploded the demand for transportation; railroad tank car disasters have increased as well.

Oil and gas producers favor Trump’s desire for North American energy independence. They like that Trump broke the long stalemate over the Keystone XL Pipeline. This project, also supported by trade unions, was derailed time and again by Barack Obama. Reversal of that poor decision opens the valves for the flow of tar sands oil from Canada.

Guess which country supplies most of the imported steel in the United States? It’s Canada, which is responsible for nearly 18 percent of imports. No other country comes close.

If North American energy independence is a paramount goal, then perhaps North American steel independence should take priority over the America First approach favored by Trump. Mexico is fourth on the steel export list. Combined, Canada and Mexico supply nearly a quarter of the steel imported into the United States.

Still, Trump is determined to champion America First in nearly everything. In this case, it’s simply not practical or even wise. U.S. oil and gas production gains have been impressive. The industry is better off if it can sell its commodities and their derivatives in world markets. The same should be true for steel.

Bloomberg News reports that Energy Transfer, a major pipeline builder, said that when it purchased pipe for three U.S. projects simultaneously, “it effectively consumed the entire domestic capacity.” Imagine if Washington forbade the sale of imported oil in this country. The result would be shortages and dramatic price hikes for the consumer.

What’s motivating Trump and the unions is that more than three-fourths of the pipe used in oil and gas projects begins as imported steel. That’s too much, perhaps, but mandating or pressuring the industry to use only American-made steel is way too much, too fast.

Oil industry trade groups say that relying on domestic pipeline-quality steel would lead to long construction delays and higher costs. Almost surely a mandate would push even more oil onto rail tank cars.

Naturally, steelmakers accuse Big Oil of fear-mongering. They say they can handle the increased business and complain about the glut of cheap, foreign steel. Over time, they probably could meet a greater demand.

The argument is perhaps moot because no domestic steel mandate is in place and no one knows how it would be enforced.

So it’s now another one of those Trumpian ideals like the Mexico-financed border wall. It plays well but won’t necessarily play out.